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Basic Question 3 of 4
According to the textbook, ______ method is a theoretically preferred method to estimate the terminal value of a private company at the end of the initial projection period.
B. capitalized cash flow.
C. excess earnings.
A. free cash flow.
B. capitalized cash flow.
C. excess earnings.
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Learning Outcome Statements
calculate the value of a private company using free cash flow, capitalized cash flow, and/or excess earnings methods;
explain factors that require adjustment when estimating the discount rate for private companies;
compare models used to estimate the required rate of return to private company equity (for example, the CAPM, the expanded CAPM, and the build-up approach);
CFA® 2025 Level II Curriculum, Volume 4, Module 25.